A Simple Checklist for Closing Your Business Acquisition Loan and Getting Funding Faster

Okay. You’ve applied for a loan, and got all the paperwork done. The appraisal is complete. You get the email:

Congratulations—you’re approved!

An offer letter is issued, letting you know that you’ve been approved for the loan. Now it’s time to close the loan, and the sale.

Trust us. This is one phase you don’t want to do on your own. Make sure you have a legal consultant available to review the paperwork so that things go smoothly.

The SBA has published some checklist guidelines to make sure you complete everything necessary to make the transition legally. Check it out, check the boxes, and you’ll be right on your way to closing your business acquisition loan!

Before you close:

Verify the adjusted purchase price. Take into consideration not only how much the business itself is selling for, but the prorated rent, utilities, and inventory at the time of sale as well.

Review required documents. These documents will vary by state (check with your Secretary of State for more information), but should include a corporate resolution approving the sale, evidence the business is in good standing, and any tax releases promised by the seller.

Sign the promissory note. In instances where seller financing is used, make sure the documentation for this contract is correctly filled-out.

Review security agreements. List the assets that will used as security against payment of the loan.

Submit UCC financing statements. These UCC (Uniform Commercial Code) docs need to be submitted and recorded with the Secretary of State where your business is located.

Negotiate your lease. If the business you purchase has an existing lease, make sure you have notified and worked with the landlord to switch it over to your name. The landlord may have you start a new lease instead.

Transfer vehicle ownership. If your business came with company vehicles, make sure you update the paperwork to reflect the correct owner. As specific transfer policies may vary by location, check with your local DMV to see what is needed for you.

Obtain the bill of sale. This is the receipt proving the business has been sold. It transfers ownership of the business to you and accounts for any business assets not otherwise transferred.

Update patents, trademarks, and copyrights. Make sure they reflect the new management, as applicable.

Complete franchise documents. Each franchise has different requirements. If you purchased a franchise, consult their manuals for any additional documentation.

Review the closing or settlement sheet. This is the financial record of the sale. The prices of items listed here have already been negotiated and agreed upon.

Draw up a covenant not to compete. While this isn’t legally necessary, it’s wise to have the seller sign a contract promising not to compete against the business.

Create a consultation agreement. If the seller is staying on as a consultant once the business sells, you need legal documentation.

Complete the IRS form 8594 (or asset acquisition statement). This will help you allocate your purchase and assets for your tax return.

Comply with bulk sale laws. These can affect the sale of business inventory.

While closing time will vary by lender, having a basic understanding of what you need to do—and getting everything in order—will help the process go as quickly as possible.